Introduction to the Market Insights programme

1. Introduction to the Market Insights programme Andrew D. Goldberg Executive Director, Global Market Strategist

2. Why Market Insights? Political uncertainty Government indebtedness Extreme uncertainty

3. Market Insights: a programme designed to cut through the noise

4. Market Insights: programme summary Market Insights is a program designed to provide timely market and economic insight to clients of J.P. Morgan Asset Management. • The programme was launched in 2004 with the first Guide to the Markets book • Today we distribute 85,000 books each quarter to our US clients, and many more globally • Last year over 60,000 clients dialled-in to hear Market Insights conference calls • Market Insights is distributed in 25 countries and 12 languages, including Italian, French,German, Spanish, Portuguese, Chinese, Japanese, and Korean • The program is used by IFA’s, institutional investors and many banks, private banks, fund selectors and gatekeepers

5. A compilation of many market data sources

6. Access to a global capability: GTM available in US, UK, Europe, Brazil, Asia London New York Milan Tokyo Los Angeles Hong Kong Sao Paolo

7. Supported by a global team of strategists Experienced market strategists provide insights on a variety of market and economic topics The Europe team: Andrew Goldberg Global Market Strategist Head of European Team Dr. David Kelly, CFA Chief Global Market Strategist Head of Global Team Dan Morris, CFA Global Market Strategist London Paola Toschi Global Market Strategist Milan Tom Elliott Global Market Strategist London

8. Five things our clients need to know Don’t confuse the economy with investing Emotions are great for movies, but terrible for investing Don’t bet against central bankers Everyone needs income – and there are ways to get it This is not the year to be out of the markets

13. Five things our clients need to know Don’t confuse the economy with investing Emotions are great for movies, but terrible for investing Don’t bet against central bankers Everyone needs income – and there are ways to get it This is not the year to be out of the markets

14. YOU ARE HERE

16. Five things our clients need to know Don’t confuse the economy with investing Emotions are great for movies, but terrible for investing Don’t bet against central bankers Everyone needs income – and there are ways to get it This is not the year to be out of the markets

18. How long will it take to reach 6.5% unemployment? • US jobs & the Fed’s target: • The Fed is targeting 6.5% unemployment, 2.5% inflation. • Payroll data revised by +647,000 jobs (oops!) from Mar-2011 through Dec-2012. The 3- mo avg. is now exactly at 200k, the best pace since early 2012 • Pace matters. If… • …the participation rate holds steady, and job growth averages +200K/mo, unemployment would hit 6.5% in January 2015 • …the participation rate holds steady, and job growth averages +175K/mo, un-employment won't hit 6.5% until early 2017 US 10-year Treasury Yield vs. Monthly Payrolls Payroll jobs 10-year Treasury Yields +157,000 in January Courtesy of Phil Camporeale, GMAG

19. The Fed’s focus on employment is supportive of equities

20. Five things our clients need to know Don’t confuse the economy with investing Emotions are great for movies, but terrible for investing Don’t bet against central bankers Everyone needs income – and there are ways to get it This is not the year to be out of the markets

24. Five things our clients need to know Don’t confuse the economy with investing Emotions are great for movies, but terrible for investing Don’t bet against central bankers Everyone needs income – and there are ways to get it This is not the year to be out of the markets

25. 2013: Not the year to be out of the markets Intrade: Probability of European Nation leaving the Eurozone in 2013 Italian and Spanish 10yr government yields Housing improvement is for real China GDP Growth Year on Year (YoY) Percent change (%) Source: (top-left) Intrade, J.P. Morgan, Bloomberg. As of January 18, 2013. (bottom-left) J.P. Morgan and Bloomberg. As of January 18, 2013. (top-right) J.P. Morgan and Bloomberg. As of January 18, 2013. (bottom-right) Source: Bloomberg and China Customs, Korea Customs, Taiwan Ministry of Finance. As of January 18, 2013.

29. Where this leaves us... The economy is not the same as the market While economic data have been stabilizing in China, less bad in Europe, and trending up in the US, the markets have dramatically outperformed economic growth Emotions have hurt investors Anxiety and uncertainty have kept investors from staying balanced, causing many to miss tremendous opportunities (and creating new ones for savvy investors) Don’t be against central bankers Central banks seem committed to printing money, with implications for our clients, including a need for income and the importance of not betting against them. This is not the year to be out of the markets Global indicators suggest it would be unwise to be waiting on the sidelines in 2013; stay invested, but maintain balance

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